London, 26 April 2013 -- Moody's Investors Service has today affirmed the Ba3 corporate family
rating (CFR) and Ba3-PD probability of default rating (PDR) of
Globaltrans Investment PLC (Globaltrans). The outlook on the ratings
is positive. Concurrently, Moody's has affirmed the
B1 senior unsecured ratings assigned to the domestic bond issues by New
Forwarding Company, a 100% subsidiary of Globaltrans,
and guaranteed by Globaltrans, with a loss given default (LGD) assessment
of LGD5/81%.
RATINGS RATIONALE
Globaltrans's CFR of Ba3 continues to reflect (1) Moody's
expectation that the company's financial metrics will remain strong
on a sustainable basis, with debt/EBITDA declining below 2.0x
(as adjusted by Moody's); (2) the company's growing size
and strong position in the Russian freight rail transportation market,
supported by a 30% expansion of its railcar fleet year-on-year
to 61,935 units as of year-end 2012, and established
customer base; (3) its fairly modern own railcar fleet, the
average age of which is seven years, providing economies in terms
of repair costs; (4) its fleet diversification in terms of type of
railcars, with nearly two thirds represented by universal gondola
cars and the remainder mostly by tank cars; (5) its high EBITA margin
of above 25% (as adjusted by Moody's), resulting from
continuing cost control and sophisticated empty run management; (6)
its solid liquidity and balanced debt maturity profile, with nearly
80% of debt maturing beyond the next 12 months as of year-end
2012; and (7) its moderate foreign currency risk, with the
company's foreign currency-denominated debt representing
less than 10% of its total debt as of year-end 2012.
The CFR also factors in (1) uncertainty surrounding Globaltrans's
long-term market position given the potential transformation of
the competitive landscape; (2) the potential deterioration in the
freight transportation market environment in Russia, reflected by
a continuing decline in freight volumes as reported by Russian Railways
JSC (Baa1 stable) (although Moody's expects Globaltrans to remain
resilient to a potential market downturn, as it has been the case
historically, owing to its position as a preferred contractor for
its key customers); (3) the possibility that Globaltrans will continue
to make sizeable debt-financed acquisitions or investments in fleet
expansion; (4) the company's significant customer concentration,
with 60% of its 2012 net revenues from operating its rolling stock
derived from its five largest customers; and (5) the company's
overall exposure to an emerging market operating environment with a less
developed regulatory, political and legal framework.
The senior unsecured ratings assigned to the domestic bond issues by New
Forwarding Company, and guaranteed by Globaltrans, are one
notch below the CFR. This difference reflects the subordination
of the bonds (around $400 million of which are outstanding) to
a significant proportion of secured debt in the Globaltrans group's
debt portfolio. Although this proportion has increased over the
past year, the rating on the bonds remains only one notch below
the CFR owing to Globaltrans's strong positioning in its current
CFR.
The positive outlook reflects the potential for an upgrade of Globaltrans's
ratings over the next 12-18 months given Moody's expectation
that the company's financial metrics will strengthen.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's could consider Globaltrans's ratings for an upgrade
if the company reduces its debt/EBITDA to below 2.0x (as adjusted
by Moody's) on a sustainable basis, while maintaining solid
liquidity and demonstrating a strong operating performance.
Conversely, negative pressure could be exerted on the ratings if
debt/EBITDA increases above 2.5x (as adjusted by Moody's)
on a sustained basis, or there is a material deterioration in Globaltrans's
liquidity, operating performance or market position.
PRINCIPAL METHODOLOGY
Globaltrans Investment PLC's and New Forwarding Company's
ratings were assigned by evaluating factors that Moody's considers relevant
to the credit profile of the issuer, such as the company's (i) business
risk and competitive position compared with others within the industry;
(ii) capital structure and financial risk; (iii) projected performance
over the near to intermediate term; and (iv) management's track record
and tolerance for risk. Moody's compared these attributes against
other issuers both within and outside Globaltrans Investment PLC's
and New Forwarding Company's core industry and believes Globaltrans
Investment PLC's and New Forwarding Company's ratings are
comparable to those of other issuers with similar credit risk.
Other methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of this methodology.
Cyprus-based Globaltrans Investment PLC (Globaltrans) is one of
the largest private railway transportation groups operating in Russia
and the Commonwealth of Independent States (CIS), with a fleet of
61,935 railcars as of year-end 2012. In 2012,
the company transported 84 million tonnes of various cargos and generated
$2.1 billion of revenue and $734 million of EBITDA
(as adjusted by Moody's). Globaltrans is a public company
that has been listed on the London Stock Exchange since 2008.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Artem Frolov
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
David Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
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Moody's affirms Globaltrans's Ba3 rating with positive outlook
